Help Calculating Impact of Company Car Tax Vs Cash Allowance

invincible

Hi folks,

I'm considering taking out a company car instead of my personal allowance but struggling to calculate how much it really cost me and whether I am better off taking out a personal lease where would be no BIK tax. The former requires no deposit, however, and includes insurance/maintenance which is a huge advantage.

My basic monthly gross pay is £5,175/month (excluding pension/benefits/stock) and I currently get a £550/month cash allowance on top of that. I'm looking at the Toyota RAV4 2.5 VVT-i Excel Hybrid Auto which will use up £421.93 of it and leave me £128.07 that I will continue to receive. The indicative BIK provided is £340.31. This model has a P11D price of £34,725 and CO2 of 129 g/km.

My limited understanding is that my income tax/NI will be reduced (hard to work out by how much since it's not a straight 40% calculation) as my cash allowance drops from £550 to £128.07. However, I will have pay around £340.31 extra a month in BIK tax.

What I don't know and want to figure is what will it really cost me when I factor in the additional tax I paying due to the BIK AFTER reduction of my allowance tax/NI. I think it might still be cheaper to take out a personal lease even after the separate deposit, insurance, maintenance, etc but can't say for sure yet.

Thanks in advance and let me know if I've missed any required details!

calcotti

Suggest you post in the Cutting Tax forum. This is the welfare benefits forum.

Dazed_and_C0nfused

Do you mean your employer will provide you with a company car and continue to pay a (reduced) car allowance??

And be very careful with indicative BIK costs.  A lot of sites are based on the assumption you will be paying either 20% or 40% and that often isn't the case.

invincible

Dazed_and_C0nfused said:

Do you mean your employer will provide you with a company car and continue to pay a (reduced) car allowance??

And be very careful with indicative BIK costs.  A lot of sites are based on the assumption you will be paying either 20% or 40% and that often isn't the case.

Yes, I will get both. I've posted this in the Cutting Tax forum if you could kindly respond to that thread. The link is here...

https://forums.moneysavingexpert.com/discussion/6191894/help-calculating-impact-of-company-car-tax-vs-cash-allowance/p1?new=1

Also, according to this web site, "Unlike your salary, which is taxed by varying percentages depending on how much you earn, company car tax is a flat 20, 40 or 45 percent rate. So, if you earn £42,384 you will only pay 20 percent in tax. Earn a penny more and you'll have 40 percent of your company car's taxable amount (the P11D value divided by the BIK tax percentage) deducted from your pay each month." So why might the assumption that I will pay 40% not be the case?

Dazed_and_C0nfused

Tax doesn't work like that.

The BIK is just another source of taxable income like car allowance.

If you had say taxable salary of £42,000 and BIK of £12,000 then you aren't going to be paying 20% tax on the BIK, it will be some at 20% and some at 40%.